Contango
Contango is the shape of a futures curve in which each later delivery month trades above the one before it. It reflects a carry cost, such as financing, storage and insurance, that outweighs any income or scarcity value from holding the underlying now, and it makes calendar spreads quoted near minus far negative.
Senzoukria · Glossary · Updated September 2026
Definition
The CFTC glossary describes contango as a market situation in which prices in succeeding delivery months are progressively higher than in the nearest delivery month. It is a statement about the whole curve of listed months, not about one contract.
Where it comes from
Holding the underlying until a later date costs money: interest on the capital, storage and insurance for physical goods. If that cost exceeds what the holder earns along the way, such as dividends or the convenience of having the good at hand, a later delivery must be priced higher, otherwise buying now and selling forward would earn a riskless return.
- Equity index futures: financing rate versus dividend yield.
- Storable commodities: storage, insurance and financing versus scarcity.
- The steeper the carry, the larger the gap between months.
Worked example
Hypothetical crude oil curve: first month 70.00, second month 70.60, third month 71.20. Each step is 0.60 dollars per barrel. With a 0.01 tick worth $10 on a 1,000-barrel contract, 0.60 is 60 ticks, or $600 per contract between neighbouring months.
What it means for a trader
For a position held across rolls, contango means buying each new contract higher than the one sold, and, if the spot price stays flat, watching the new contract drift down toward it as expiry approaches. For an intraday order flow trader the effect shows up at the roll: every level moves up by the spread when the chart moves to the next contract.
In Senzoukria
The application does not draw a futures price curve across months. The same words appear on its GEX volatility page for a different curve, the at-the-money implied volatility across option expiries, where the reading 'Contango — the back expiry is paid above the front' refers to volatility, not to futures prices.
Common mistakes
- Reading contango as a bearish or bullish signal on its own.
- Confusing contango (shape across months) with the basis (one contract versus cash).
- Transferring a volatility-curve reading to the futures price curve.
Related
In the same section
- Calendar spread
- Continuous contract
- Consolidated tape
- Contract roll
- Consistency rule
- Contract specs
- Connection preflight
- Convergence
Sources
- CFTC glossary (2026-09-25)
This page in other languages
Frequently asked questions
- Are equity index futures usually in contango?
- They are when short-term interest rates exceed the index's dividend yield, because financing the stocks costs more than the dividends they pay. When the dividend yield is higher than rates, deferred index futures trade below the front instead.
- Is contango the same as a positive basis?
- They are related but answer different questions. The basis compares one futures contract with the cash price; contango describes how the listed months line up against each other.